Sarah, a 45-year-old high-net-worth client residing in British Columbia, has a portfolio valued at $5,000,000. Her target asset allocation is 60% equities and 40% fixed income. Due to strong market performance, her current allocation has shifted to 68% equities and 32% fixed income. What is the approximate 'portfolio drift' in dollar terms for her equity allocation?

Question: Sarah, a 45-year-old high-net-worth client residing in British Columbia, has a portfolio valued at $5,000,000. Her target asset allocation is 60% equities and 40% fixed income. Due to strong market performance, her current allocation has shifted to 68% equities and 32% fixed income. What is the approximate 'portfolio drift' in dollar terms for her equity allocation?

Answer options: ✅ $400,000

• $340,000
• $200,000
• $280,000

Correct answer: $400,000

Explanation: The target equity value is 60% of $5,000,000 = $3,000,000. The current equity value is 68% of $5,000,000 = $3,400,000. The portfolio drift in dollar terms for equities is the current value minus the target value, which is $3,400,000 - $3,000,000 = $400,000.